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Federalism and localisation in intellectual property law-making

"Federalism and localisation in intellectual property law-making" is the title of the December JIPLP guest editorial by Phillip Johnson (Professor of Commercial Law, Cardiff University). It reads like this:

Had there been a “Yes” vote in the Scottish independence referendum on 18 September 2014 all sorts of interesting intellectual property questions would have arisen: What happens to existing patents, trade marks and designs? Should an independent Scotland join the European Patent Convention or TRIPS? Should a Scotland outside the European Union extend Community trade marks and Community designs while it waited to (re)-join the EU? Thankfully, Scotland voted “No” and we do not have to answer these issues (although some countries have done so already for example, Montenegro when it separated from Serbia).

Yet the “No” vote allows us to consider another possibly more interesting question. Why is it that the power (competence) to make intellectual property laws is usually a federal one? If one looks to the United States when its Constitution was drafted in 1787, copyright and patents were firmly within the legislative powers given to the US Congress (rather than left to the states). Similarly, the Constitution of Canada (British North America Act 1867) and that of Australia (1900) both reserved such matters to the federal parliament. This phenomenon is not confined to common law federations, so for example, that of Argentina (1853) and the North German Confederation (1867 and later the German Empire (1871)) also left intellectual property to the federal parliament. Similarly, the European Economic Community (now the European Union) tried to set up federal (ie Community) trade marks and patents soon after the coming into force of the Treaty of Rome in 1958. The former taking over thirty years to come into being and we are still waiting on the latter. And more recently, the Court of Justice (in C-114/12 Commission v Council) seems to have made copyright something (almost) exclusively within the power of the EU (and not Member States). Indeed, returning to Scotland, the devolution settlement likewise reserved intellectual property matters to Westminster (except plant varieties). So what is it about intellectual property that makes it invariably federal?

Conversely, as international treaties relating to intellectual property law have become more prescriptive (particularly the TRIPS Agreement) there are increasingly calls to push for the use of the “flexibilities” permitted under those treaties. Utilising them means countries can have more control over what is protected by intellectual property laws and what is not. In other words, this flexibility enables the domestic law to reflect a country's particular stage of development while still being compliant with international requirements.

If one concentrates on patent law alone, it is fair to say that, invariably, the various provinces, states or regions within a federation will be at very different stages of development when the federation is formed. And so, if the logic applied to TRIPs is applied more generally, this would suggest against a federal patent power, rather leaving it local governments to legislate for their own particular needs. For example, the Southern United States was predominately agricultural long after the industrialisation of the North. A state (rather than federal) patent law would have allowed flexibilities to exist to cater for this difference.

We know little of why patent law was reserved to Congress, it had been a matter for each of the thirteen colony before the revolution and James Madison in The Federalist when explaining the grant of the federal power say no more than the States could not make effectual provision for patents (or copyright). So why do national (federal) laws traditionally prevent local governments exercising flexibility to fit local needs? Some reasons are put forward below, but each must be discarded.

Simple reasons, such as patent law is too important to be left to the governments of constituent states are clearly nonsense. Many federations leave much more important and politically sensitive matters than patent law to those states. The divergence cannot be put down to the international elements of patent law. The United States avoided international entanglement in intellectual property for most of its first century—and of the other examples all but Australia predate any of the major intellectual property treaties. Neither can it be put down to the stages of industrial development when the constitutional powers are allocated. The role of patents in the newly independent United States must have been marginal at best; at least based on number of patents granted: fewer than 100 were granted annually before 1807 and it took until 1854 to top 1,000 a year (very similar figures to England in fact). These low numbers also point against another modern actor, namely, big corporations who are currently blamed for lobbying for international/federalisation so as to set uniform laws set at a ‘high' protection standard. Not only were too few patents granted to have much effect on business overall but at this time patents were largely granted to individuals (indeed, the inventor has, until recently, had to personally apply for the patent in the US; and in the UK it was not until 1852 that a company could even own a patent).

Another reason might be that a federal power and rules avoid patent laws creating internal barriers to trade (and what would now be called the imposition of transaction costs). This could also extend to avoiding problems being created by needing to localise the patent under internal federal conflict rules so as to avoid multiple state laws applying to one incident. Thus avoiding these barriers and conflicts is more important than local development needs within the federation. This fits with the EU Commission's reasoning for harmonisation, but it does not fit other federations. In the US, the law governing the sale of goods and the formation of corporations are state matters and, arguably, both put up more significant trade boundaries than patent law (so much so the former has led to the states adopting a Uniform Commercial Code). So why at the foundation of the United States would federal powers be allocated to avoid one type of trade barrier but not other more significant ones? So there must be another reason for this trend. Or is there? Maybe it has simply become a tradition to federalise intellectual property law-making.

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The principal contents of this weblog are drawn from the Current Intelligence features which are published monthly in JIPLP.

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